IDG News Service —
India's top outsourcers have increased their share of the global IT services market, as customers break down large multi-billion orders into smaller orders that Indian outsourcers can handle, and also as customer confidence in Indian providers grow, according to research firm Gartner.
Gartner said on Thursday that the top six Indian offshore service providers, including Satyam, Wipro, Infosys, Tata Consultancy Services, Cognizant and HCL Technologies, accounted for 2.4 percent of the total worldwide IT services market last year as compared to 1.9 percent of the total worldwide IT services market in 2006.
All the companies in Gartner's list have their headquarters in India, with the exception of Cognizant, which is based in the U.S. but delivers services mainly from India.
India's top outsourcers have delivered high quality at low cost, and put in place top quality human resources practices that enable them to hire and manage a large number of staff, said Arup Roy, senior research analyst at Gartner, on Thursday.
"We expect the share of these companies to continue growing," Roy said.
Other analysts agree that India's top outsourcers are increasing their share of the IT services market. The share of Indian outsourcers has been growing over the last few years, and most of the growth has come from their strength in application development and maintenance (ADM), said Siddharth Pai, a partner at outsourcing consultancy firm Technology Partners International. Indian companies are now clinching larger orders for ADM, and have close to 40 percent of this market, he added.
There are, however, challenges ahead for the companies in the Gartner list. Large multinational services companies like IBM and Accenture have set up operations in India to take advantage of the country's lower staff costs. The lower costs of Indian providers will not continue as a significant differentiator down the line, Roy said.
These outsourcing companies are also grappling with growing staff costs, staff attrition, the appreciation of the Indian rupee against the dollar, and their large dependence on the U.S. market which accounts for about 60 percent of their revenue.
India's outsourcing business, which includes IT services and business process outsourcing, is likely to see its revenue growth rate fall to about 25 percent this year from an estimated 29 percent in the Indian fiscal year ended March 31, Som Mittal, president of the National Association of Software and Services Companies (NASSCOM), told reporters last week in Bangalore. The main reasons: the economic slowdown in the U.S. and the rise in oil prices.
India's top outsourcing companies are however expanding their operations in other countries to reduce their dependence on the U.S. market. These companies' share of the total Western European IT services market, for example, moved up from 1.5 percent in 2006 to 1.9 percent last year, after their Western European revenue grew by 51 percent, according to Gartner. Attempts by the top Indian companies to diversify into new services like remote infrastructure services have also been successful, Roy said.
